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Yum! Brands Beats In Q1, Pizza Hut A Weak Link

Yum! Brands (YUM) beat out earnings and revenue estimates for Q1, though numbers were still down year-on-year.

The fast food company — which holds international chains Taco Bell, KFC and Pizza Hut — reported earnings per share at $0.65, up 17 percent YoY and above the average analyst estimate of $0.60.

Following the release of the company’s earnings report on Wednesday market open, YUM shares spiked nearly 3.67 percent to $67.78 in early-morning trading. Though tempered somewhat by the rest of the day, YUM still looks to close on a high note.

Revenues for Q1 2017 hit $1.42 billion, down 1.8 percent from the same period last year when Yum brought in 1.44 billion. The company reported that the loss was largely due to lower company sales, down 5 percent YoY.

Still, YUM beat out average revenue estimates, which had pegged the company would only see $1.35 billion in Q1.

“Our strategic transformation of Yum! Brands is already well underway, helping us deliver a solid start to 2017 with core operating profit growth of 9% in the first quarter,” said CEO Greg Creed in the release.

YUM attributes the Q1 growth to Taco Bell’s 8 percent growth in same-store sales, as well as a 13 percent growth in KFC’s core operating profit.

Combined, YUM saw system sales grow, driven by a 2 percent rise in same-store sales growth and 3 percent net unit growth across divisions.

If there was a weak link in the YUM chain of divisions, it was most certainly Pizza Hut.

The global pizza chain’s comp-sales fell 3 percent overall in Q1. While international emerging and international emerging markets saw comps grow 2 and 1 percent respectively, U.S. comp-sales fell 7 percent in the period.

The company looks in part to turn the pizza slump around with a Transformation Agreement with franchise owners said Restaurant News.

The deal will see YUM invest $130 million in its Pizza Hut division to improve brand marketing alignment, accelerate enhancements to O&T and include a permanent commitment to incremental advertising among franchise owners.

This strategy is similar to the one KFC leveraged to pull KFC out of a similar slump in 2015.

“We remain confident that our multi-year strategy to be more focused, more franchised and more efficient,” Creed said, “will further strengthen our brands, accelerate growth, increase consistency in our results and increase capital returns.”

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